 "DBS looks to ramp up its corporate book")
Singapore-based DBS bank that had been going slow on growing its corporate book in the last couple of years has once again put the spotlight on this segment and is looking at expanding it significantly. Top executive at DBS Bank said that the bank will focus on scaling up its corporate lending activity in 2016-17. "We will be focusing on growing our corporate .This will be in addition to expanding our small and medium enterprise loan book."
Bank had seen a surge in bad loans in its corporate loan book in India about 24 months ago and made provisions accordingly. It had reduced its exposure in the infrastructure and construction sector, the two key areas from where it witnessed pressure on asset quality. Now, the lender believes that it is in position to increased lending to corporates in prudent manner, added the executive quoted above.
This comes after the bank has managed to swing back to profit in FY16 after recording a loss for the first time in last twenty years in FY15. However, the bank continues to see pressure on asset quality with its gross Non Performing Assets (NPA) remaining at elevated levels at 4.34 per cent at end of the quarter ended March. But the lender is on a better footing after taking a hit on its balance sheet in the last two financial years.
At the same time several other foreign banks continue to adopt a caliberated approach to the corporate sector as a whole owing to the subdued growth in the economy. In fact, it is not only the corporate but DBS is looking at expanding its reach even in the retail segment and has been changing its strategy to target mass end consumer base as opposed to its early concentration on only the affluent base.
This also comes at a time when the bank has applied to the Reserve Bank of India to convert into a Wholly Owned Subsidiary (WoS). The lender had made the application in April last year and was earlier hoping to get clearance in a year's time. However, it is still awaiting the final clearance from the regulator.
The management has continued to maintain that India remains a key market for them with Indian operations accounting for about five per cent of the total book. So far, the lender has invested Rs 6,500 crore into India. It infused Rs 1,700 crore of tier-2 capital in the past two years and Rs 670 crore of tier-1 capital in FY16. The bank had explained that the need tier-i capital infusion had been at an elevated level in order to compensate for the erosion due to a rise in bad loans in the past couple of years.
Recently, S&P Global Ratings it had affirmed its 'AA-' long-term issuer credit rating on the bank. "The affirmed ratings reflect our view that DBS will maintain its strong market position, sound capital and earning capability, and satisfactory risk management track record over the next 18-24 months, despite ongoing external headwinds," said S&P Global Ratings credit analyst Rujun Duan.